Dive Brief:
- Diageo announced in a trading update for its annual meeting that due to weaker currencies outside of the UK, the company's profit is likely taking a £150 million (approximately $229 million) hit, which was more severe than the previously thought £100 million.
- While Diageo didn't name currencies or countries outright, the company had previously pointed to the euro, Venezuelan bolivar, and Russian ruble as the main currencies in question that had fallen against sterling.
- "Our outlook for this financial year included the possibility that further currency weakness could impact demand for premium spirits in the emerging markets. Therefore, while currencies are weaker in these markets, we continue to believe that stronger volume growth in full-year 2016 will lead to improved top-line performance and that we can deliver modest organic margin improvement," Diageo CEO Ivan Menezes said in the trading update.
Dive Insight:
At its annual meeting, Menezes will likely be faced with questions regarding Diageo's tumbling sales in certain markets, including in North America. Diageo reported a 3% decline in volume in the North American market in its latest earnings report, and the company is hinging on consumers' growing taste for premium spirits to pull the company out of its sales decline.
Menezes may also be confronted about the potential AB InBev takeover of SABMiller, which could have a significant impact on the beer industry, where Diageo holds such brands as Guinness, Harp, and Red Stripe. This announcement came not long after rumors that 3G Capital, parent company of AB InBev, was considering a takeover of Diageo earlier this year.